State's out of the liquor business. Now what?

Washington voters said clearly on Election Day that it was time to get state government out of the retail sale of liquor. But now there are questions about how the brave new world of liquor sales is going to look when the state quits selling May 31.

Those questions were most urgent at liquor stores and at an employee meeting at the state distribution warehouse, where a worker said tears flowed and everyone wanted to know: What’s next for more than 900 state workers whose jobs will be eliminated?

“I’m not sure,” said Margee Engle, a store clerk who lives in Olympia and works on Mercer Island. “None of us are real sure right now. We’re still in shock.”

Engle has worked in retail before but she sees her current job as quite different. In 13 years with the state, she said, she hasn’t had to cajole customers into buying larger or more expensive bottles. She just tried to keep people safe.

She’s not ruling out working in a private store that meets her ethical standards – if any will take her.

“I’m 62. I’m not real hire-able at this point,” Engle said.

Nearly 60 percent of voters supported Initiative 1183, backed by Costco’s $22.5 million contribution. The measure rips liquor sales out of state hands and gives it to medium- and large-sized retailers.

It was a momentous occasion for supporters of privatization such as state Sen. Tim Sheldon, a Potlatch Democrat who long has fought to put the state system into private hands.

On Wednesday, he released a statement that said, in part: “I always thought it made no sense for the state to sell liquor and I credit the initiative organizers for getting the state out of the liquor business … I love the initiative process because it can do what the Legislature couldn’t.”

Also Tuesday:

• Voters approved I-1163, which boosts training requirements for home-care aides.

The home-care measure is raising questions with state budget writers, who say they are not sure where they will come up with the extra $18 million in state financing for the next two years.

House Ways and Means Committee chairman Ross Hunter, D-Medina, said late Tuesday night that he expects lawmakers will have to find the money, and two Republican budget writers – Sen. Joe Zarelli of Ridgefield and Rep. Gary Alexander of Thurston County – said they expect lawmakers won’t suspend I-1163 so soon after an election.

But lawmakers twice have delayed a similar measure from 2008, and Cindi Laws of the No on 1163 campaign said adult family home operators and other opponents already were talking to lawmakers about another delay.

• Voters were narrowly rejecting I-1125’s highway tolling limits, which means that toll-setting decisions remain with the Transportation Commission. The defeat removes a threat to a proposal to toll Interstate 90 to help pay for a new State Route 520 floating bridge east of Seattle. Support for the Tim Eyman-backed measure waned after Wednesday’s vote count, falling to 48.5 percent.

The liquor measure is ushering in the most change of any one measure.

“I don’t know of a state that has gone through an aggressive transition like this,” Washington State Liquor Control Board spokesman Brian Smith said. “There will be bumps along the way.”

Smith said the agency is hoping national liquor, wine and beer distributors agree to keep supplying state stores through May 31 – and also to take back any surplus when the 166 state stores shut down.

CONTRACT STORES

Operators of 162 privately owned contract stores are allowed to stay in business. Many are in rural areas that might not be served by the larger retailers such as Costco and Safeway, which are expected to loom large in the new market.

But the survival of contract stores depends on a few factors – mainly the willingness of private companies to pay for liquor inventories that previously were furnished by the state, Smith said. The average inventory in a contract store is $125,000, he said.

“We don’t have a lot of answers yet,” said Rudy Contreras, the owner of a private store in Grand Mound, south of Olympia. But Contreras said he has no question about staying in business as a liquor seller, having spent $1.5 million two years ago to renovate his large “specialty” store that stocks nearly $500,000 worth of products.

“Everything is up in the air. There is going to be credit lines from the distributors. Also, we’ve got credit lines with banks,” he said.

In DuPont, the general manager of a family-owned contract store that opened less than a year ago worries about competition from big stores such as Costco.

The retailer has a store eight miles away in Lacey, and DuPont Cigar and Liquor’s JiHyun Pang says there’s clearly a reason for Costco’s record-breaking contribution to I-1183.

“They know they can make money. That’s why they did it,” Pang said.

Pang also wondered whether more small stores will pop up nearby. Stores smaller than 10,000 square feet will need the liquor board’s blessing to sell liquor, but Pang wonders if new stores and the tax revenue and license fees they bring will be irresistible to the state.

Joe Gilliam, president of the Northwest Grocery Association, which represents large grocers such as Costco, predicts the former contract stores will be the only game in town when it comes to small stores.

“Any new outlet is going to be a grocery store,” Gilliam said as results rolled in Tuesday night showing his side winning by nearly a 3-to-2 margin.

Small grocers also have worried about the big stores’ ability to take advantage of I-1183’s new rules allowing volume discounts and bypassing distributors by using central warehouses. But Gilliam said there will be a level playing field.

Small grocers will be able to pool together for warehousing of alcohol as they do now for other items, Gilliam said, contradicting opponents’ claims that such a partnership would be banned.

“There will be some changes for them to make, but they will have the same opportunity to compete with liquor as they do with milk or Frosted Flakes,” Gilliam said.

Brad Shannon: 360-753-1688
bshannon@theolympian.com
www.theolympian.com/politicsblog

Jordan Schrader: 360-786-1826
jordan.schrader@thenewstribune.com
blog.thenewstribune.com/politics
twitter.com/Jordan_Schrader